Education - Money Management

Money Management

This is a topic that not many people like to discuss, and perhaps may have different understanding of what it really means. I believe it is different depending on the risk appetite of each investor. Money management at the heart of it really means managing your money, and where investments are concerned, you would want to manage your money properly so that you don't blow it all up on one trade.

But like it said, it is all about your appetite for risk. To some people, money management could be all the money in the bank down but place a suitable stop loss. For others, it could be a standard investment risked every trade, and a standard stop loss. This way you can effectively measure your risk and also your profit. The idea is to commoditize your trading to a level where it is just clockwork and a paper exercise.

Of course the profits are real. Likewise the losses are real as well, so it would be good to practice some prudence when you do invest your hard-earned money. The key principle in investing is not to lose your capital. Once that occurs, you're out of the game, and there is nothing else left to say or do.

Have a sensible stop loss mechanism in place, and have a sensible trading strategy. Always focus on the low-lying fruits as your near term targets, and if you have the gumption or the risk appetite to go for more, then take it.